In my previous column, I looked at why retailers’ data is so potentially valuable, both to themselves and others. Now I want to consider how retailers should approach the whole data question, with a quick look at the strategies of some leading South African retailers.
One must recognise that the whole question of data is tied up with digital transformation itself. It’s the digital environment that creates the data, and it is digital technologies that are used to consolidate the data, store it, and then analyse it.
A key challenge is the tendency for data to be created and stored in silos that mirror the organisational or operational silos of the typical corporate. Silos are a challenge for digital transformation more broadly, which will only deliver real benefits when business processes span business units, and for data analysis.
When it comes to data analytics, though, I prefer the idea of “smart ecosystem” to “outsourcing”.
Digital transformation means just that − the way the business processes work will have to be transformed so the whole company works as one; when it comes to data, though, it is not necessary for all data to be in the same place so long as it is freely available for analysis.
Insource or outsource − the old argument comes alive
One of the most difficult decisions a company has to make in its data journey is whether to attempt to develop a data science capability in-house or engage with a specialist partner. It’s a current version of the age-old insource or outsource debate.
In general terms, the answer is always specific to the company and its particular strategy and circumstances but, in my view, data analytics is the classic case for outsourcing.
It is a highly specialised area requiring expensive and recondite skills, and getting it right is by no means easy. And while absolutely essential for success, it is definitely not core business; it is there to support the core business.
A huge company like Discovery might be able to justify the expense to set up and manage an in-house data analysis capability, but for most companies it does not make sense.
When it comes to data analytics, though, I prefer the idea of “smart ecosystem” to “outsourcing”. Smart ecosystem has the connotation of mutual benefit and also implies that expert partners, internal and external, will be involved, each contributing his or her specialised expertise. That’s a much better recipe for success in the complex data world.
Data analytics is still in its infancy in South Africa but already one can discern some interesting and divergent strategies. There are two drivers in the data world, one being loyalty cards, which are now widely used, and the second being online.
Bringing virtual and in-store together
In the online sphere, Shoprite Checkers looks like it is way ahead of competitors, via its Sixty60 app. Its Xtra rewards card is also the most successful in the South African retail industry, and it is clearly in the process of gathering huge amounts of consumer data from regular shoppers, online and in-store.
Unsurprisingly − to me, at least − Checkers took the partner route. Its partnership with Zulzi, an e-commerce platform developed by local entrepreneurs Vutlharhi Valoyi and Michael Netshipise, allowed it to get its online app Sixty60 up and running in record time. One of the reasons the app is so successful is that it links into the back-office to ensure ordering and distribution are synchronised to consumer demand.
Pick n Pay has taken the opposite line by acquiring its online shopping partner, Bottles. One could make a case for this approach − after all, Pick n Pay has smart people running it − but for my money the better option is the smart ecosystem route.
For one thing, the hallmark of entrepreneurial companies is their ability to move fast and come up with new ideas, something that corporates, by and large, are extremely poor at doing. Both Zulzi and Bottles (at least before its acquisition) have shown just how fast such companies can move.
Developments around online shopping platform OneCart will be worth watching. It has partnerships with 12 retailers, including Woolworths, Dis-Chem and Clicks, and was acquired by Massmart (Makro and Game). OneCart has also launched mobile apps for Makro and Builders Warehouse.
It thus has created an ecosystem of retailers, and it will be fascinating to see if this ecosystem evolves into ways of sharing data between the various players.
As I argued in my first article, what will set the winners apart from the losers will be how successfully they can get the virtual and in-store experiences to align.
The key will be to get customers to use their apps in store − in that way, not only will much more information be gained, but it will be possible to start creating a consistent omni-channel experience in which the virtual and real-world experiences become seamless.
The smart ecosystem concept will be critical here − imagine, for example, if the Checkers app integrated with, say, a wine app that would provide pairing and other information seamlessly once the bottle was scanned.
That app would come from a third-party, as would other apps, all in the cause of improving the shopping experience and, in the process, gaining yet more and more granular information.
The sky is literally the limit.
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